UST Program News

The house constructed to benefit UST Real Estate Programs will be one stop on the 2014 Spring Parade of Homes tour. The two-story home, located at 6443 McCauley Terrace in Edina, includes MN Green Path Energy Efficient features. Other showcases include a sports court, third-floor loft, media room, owners’ suite, junior suite, five bedrooms and six baths. The home is nestled on a quiet, wooded cul-de-sac on Arrowhead Lake.

6443 McCauley Terrace, Edina

The general contractor on the project is JMS Custom Homes who is also a major sponsor, donating its services to complete the home on time and on budget. Many other donors and sponsors have donated to the project both with in-kind gifts and building materials, including members of UST’s Real Estate Advisory Board. Sponsors to date include Crown Bank, Edina Realty, JMS Custom Homes, Marvin Windows and Doors, Shenehon Company, Alexander Design Group, Metropolitan Pipe and Supply, Outdoor Designs, Builders Association of the Twin Cities, Kraus Anderson, Barton Sand and Gravel, Cemstone, Muska Lighting, Regalwood Cabinets, Veit, Warners Stellian, and Ziegler.

Additionally, two UST undergraduate real estate students are working as interns with JMS Custom Homes during the construction and sale of a single-family home. These students
are receiving valuable experience overseeing the homebuilding process from start to finish.

The list price of the home is $1,695,000. The difference between the sale price of the home and the cost to build the home will be donated to support scholarships for St. Thomas students enrolled in the university’s real estate degree programs.

Custom Kitchen

The Spring 2014 Parade of Homes is open March 1-30, Thursdays through Sundays noon to 6pm and The Remodelers Showcase is open March 28 from 1 to 7pm and March 29-30 from noon to 6pm. For more information, visit the Parade of Homes site.

It’s a real life real estate lesson. Some University of St. Thomas real estate students are taking part in a multimillion dollar home build, and soon a home sale.

The house, which is built on the last empty lakeshore lot in Edina is weeks away from completion. When the house is completed, it will be on the Parade of Homes tour starting March 1, and after that it’ll be put on the market.

The proceeds could raise the University of St. Thomas real estate program hundreds of thousands of dollars.
The cabinets that St. Thomas Senior Teresa Lingg helped pick out were installed in the kitchen Tuesday. Lingg was one of two student interns who worked with professional builders and contractors, who donated much of their time and materials to build the Edina house.

JMS Custom Homes is building the house as close to “at cost” as possible, for roughly $1.5 million, but the asking price will be much higher.

Last week, Twin Cities real estate professionals gathered at the University of St. Thomas for the third annual Real Estate Outlook event. The program included a series of panels featuring leading experts in local real estate market segments, each offering their views on the current state of the market and their expectations for the coming year. The event was co-sponsored by Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business and Integra Realty Resources. Here is a recap of some of the major themes presented:

Economic Forecast

The keynote presentation was made by State Economist Laura Kalambokidis, who discussed the current state of the economy locally and nationally. Minnesota has generally fared better than the nation in recovering from the economic downturn. Employment in the state has now climbed back to pre-recession levels. Unemployment in Minnesota is at 4.6%, well below the national rate of 7%. Employment growth has been strongest in the health services, business services, retail, and hospitality industries, all of which have grown between 2.5 and 4% year over year. Government and manufacturing were the worst performing job sectors over the previous year, each declining by about 2%. Despite a slight drag on the economy from policy uncertainty related to the federal budgetary process, continued modest growth is expected locally and nationally over the next two years.

Office Market Update

Mike Salmen of Transwetern started off the office panel with a report on 2013, which was a decent year for Twin Cities office real estate. Absorption was modest at approximately 200,000 sf. Vacancy has slowly been decreasing thanks to the job growth and low unemployment noted by Ms. Kalambokidis. While Class A Space is performing well, Class B and C space and certain sub-markets are still seeing high vacancy.

Steve Chirhart of TaTonka Real Estate Advisors agreed, noting that the St. Paul and East suburban sub-markets were the weakest office markets in the region, although vacancy has declined from a peak of over 25%. Mark Kolsrud of Colliers stated that the St. Paul CBD had the least amount of investor interest of the regional submarkets, and that this was due to a lack of interest from lenders.

On the other side of the metro, the 394, Southwestern, and Minneapolis CBD submarkets are all performing very well. Mr. Salmen believes the I-394 corridor is currently the hottest office market in the Twin Citeis, with rates pushing into the mid-teens and low vacancy. Vacancies are also low in the Southwest submarket, despite the addition of 3 million sf of space since 2007. An anomaly in the West Metro is the Northwest submarket, which has among the highest vacancies at 24%. Mr. Kolsrud pointed out a 150 basis point swing in cap rates from the 394 area to Northwest submarkets. Like St. Paul and Eastern suburban, Northwest is unlikely to attract interest from institutional investors, although the panelists believed a local developer could find a way to make a deal work.

Lastly, the Minneapolis CBD remains the largest submarket and currently has vacancy at 15%. A big concern for office real estate downtown is the impact of the Wells Fargo build-to-suit deal with Ryan Cos. for new office space in Downtown East; the panelists speculated that this move could pull 1 million space of occupancy out of the downtown core as Wells Fargo consolidates employess in the new buildings. Another concern is the increasing obsolescence of older buildings, where mechanical systems and floorplans don’t support the employee density and layouts now desired by office tenants. But despite these concerns, downtown continues to see strong investor interest, as institutional investors from the coasts seek out the comparatively higher cap rates available in Class A properties in Minneapolis. Additionally, institutional investors are increasingly interested in “non-traditional” investemnets, such as office conversions in historic warehouse buildings in the North Loop area.

The office market panelists ended with a discussion of a macro trend that will have a large impact the office market going forward, which is coporate users taking less space per employee. The average space used per employee is expected to decline from over 220 sf to 150 sf by 2015. Among ten large renewals over the last 18 months, almost all took less space than they had before. Thus despite employment growth, the outlook for office absorpbtion is flat.

Retail Market Update

The retail market panel featured a lively discussion with Jim McComb, John Johannson of Colliers, and Skip Melin of Cushman Wakefield. In the Twin Cities, 2013 saw declines in vacancy and somewhat flat absorption of roughly 900,000 sf. However, Mr. Johannson noted that good space is mostly full, and gave the example of 16 formerly vacant spaces over 12,000 sf in the Southdale area, of which 13 have leased in the last 16 months. Mr. McComb noted that there isn’t much vacancy in smaller neighborhood spaces either. He pointed out that changes in the economy and demographcis are creating opportunities in retail markets.

One of the most significant retail developments currently underway is an outlet center in Eagan. Mr. Melin noted that the center will have 400,000 sf of space for 19 tenants, anchored by Saks Off 5th. Mr. Johannson then described another large 450,000 sf outlet development currently in the planning stages, this one also in Eagan. These two projects are all the more interesting because they are just about the only large multi-tenant retail developments currently in the works in the Twin Cities. Each are banking partly on capturing tourist trade from the nearby Mall of America but also taking advantage of a submarket in Eagan that is currently under-retailed.

Contractors are taking advantage of the good weather and are making good progress on the construction of the house that is being built to be sold with excess funds going to benefit the Real Estate Programs at the University of St. Thomas.

Workers were busy last week setting the trusses on the UST Real Estate House located at 6443 McCauly Terrace in Edina. Construction began in mid-October when crews excavated the basement and began pouring the foundation and the basement walls. Framing is expected to be completed next week. The house will be completed in mid-February just in time for the house to be featured in the 2014 spring Parade of Homes. The general contractor on the project is JMS Custom Homes who is also a major sponsor, donating its services to make sure the house is completed on budget and on time. Building the house to benefit the Real Estate Programs at the University of St Thomas was a concept that was proposed and adopted by the UST Real Estate Advisory Board (REAB) as a major fundraising initiative. The idea behind the project was to solicit the donation of cash and/or building materials that will be used to build the house at a greatly reduced cost basis. The subcontractors are providing services and/or materials for the project at no cost, or at reduced cost, to help reduce the cost of construction. Many of the members of the Advisory Board have made donations towards the project or used their connections to locate other donors. The difference between the sale price of the home and the cost to build the home will be donated to St. Thomas to support scholarships for St. Thomas students enrolled in the university’s real estate degree programs.

The project will also provide hands-on experience for St. Thomas students. Two UST undergrad real estate majors are working as interns with JMS Custom Homes during the construction and sale of a single-family home. These students are getting valuable experience as they work throughout the permitting and construction process from start to finish.

The Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business has established the Minnesota Real Estate Hall of Fame to honor, preserve and perpetuate the names and outstanding accomplishments of real estate leaders who have made a significant contribution in real estate and demonstrated care and concern for improving their community as a business leader.

Construction has begun in Edina on a single-family house that will be sold to raise money for real estate education programs at the University of St. Thomas and serve as a learning tool for undergraduate and graduate students during the fall 2013 semester.

The house at 6443 McCauley Terrace, southeast of Highways 169 and 212-62, will overlook the west side of Arrowhead Lake. JMS Custom Homes, whose owner Jeff Schoenwetter is a member of the St. Thomas Real Estate Advisory Board, is the builder, and the Alexander Design Group of Wayzata is the architect.

Representatives from St. Thomas, JMS Custom Homes, Edina Realty and the UST Real Estate Advisory Board break ground on the home in Edina.

Crown Bank of Edina will provide all construction funding to JMS for the 5,900-square-foot house, which will have four bedrooms and five bathrooms.

JMS and Alexander Design Group are donating services. Other expected donors include Edina Realty, which will market the house and provide financing for qualified purchasers; Shenehon Co., appraisal services; Fabyanske Westra Hart & Thomson, legal services; and various subcontractors.

The 2013 Hines Competition is underway!

One hundred sixty teams from 70 universities in the United States and Canada are currently developing solutions for a site in Minneapolis’s Downtown East neighborhood, near the site of the new Minnesota Vikings stadium

The ULI/Gerald D. Hines Student Urban Design Competition, now in its 11th year, is an urban design and development challenge for graduate students. The Hines Competition challenges multidisciplinary student teams to devise a comprehensive development program for a real, large-scale site. Teams of five students representing at least three disciplines have two weeks to develop solutions that include drawings, site plans, tables, and market-feasible financial data.

The University of St Thomas team members are Thomas McElroy, full time MBA student; Thomas Strohm, MSRE student, Michael Richardson, Master of Urban and Regional Planning student at the University of Minnesota; Amber Hill, Master of Landscape Architecture student at the University of Minnesota; and John Briel, Master of Urban and Regional Planning student at the University of Minnesota.

This is an ideas competition; there is no expectation that any of the submitted schemes will be applied to the site. The winning team will receive $50,000 and the finalist teams $10,000 each.

The ULI/Gerald D. Hines Student Urban Design Competition is part of the Institute’s ongoing effort to raise interest among young people in creating better communities, improving development patterns, and increasing awareness of the need for multidisciplinary solutions to development and design challenges. This competition is an ideas competition; there is no expectation that any of the submitted schemes will be applied to the site. The winning team will receive $50,000 and the finalist teams $10,000 each. Winners that will advance to the next round of the competition will be announced by the end of February.

The University of St. Thomas Shenehon Center for Real Estate developed the Certificate as a strategy for professionals to keep up with market changes; the program aims to strengthen the foundation of those enrolled for the betterment of their careers, and it is designed for professionals who work within the commercial real estate industry as well as for those making a transition into it. The six programs provide a comprehensive background of best practices in commercial real estate in the areas of Valuation, Urban Land Economics and Market Analysis, Commercial Real Estate Finance, Investment and Income Analysis, Asset Management, and Legal Aspects of Real Estate and Governmental Controls. For more information on the Professional Certificate in Commercial Real Estate, visit http://exed.stthomas.edu/CommercialRealEstateEducationMN.

Real Estate professionals who want upgrade their skills to set them apart from other candidates and to prepare for possible promotions or a job change.

People who are considering commercial real estate as a career.

People who want to know more about investing in income producing real estate for themselves or others.

Individuals in fields associated with real estate, such as architecture, construction, law, and planning

Focusing on the essential concepts, principles, and tools for the analysis of commercial real estate, this certificate program will provide commercial real estate professionals with the tools they need to understand real estate investments in today’s dynamic economy. Participants in the program may sign up for one program or the entire series – whatever works best for their schedule or allows them to meet their career goals. Programs in the certificate are: